In a corporation, the interests of the owners, who seek to maximize profits, may differ
from the interests of the managers, who seek prestige and high income. This divergence
would be considered:
A. a free-rider problem.
B. a rationing problem.
C. a limited liability problem.
D. a principal-agent problem.
In percentage terms, which occupation is expected to be the fastest growing from 2008
to 2018?
A. Photographic processing machine operators.
B. Sewing machine operators.
C. Home health aides.
D. Biomedical engineers.
If an increase in the supply of a product results in a decrease in the price, but no change
in the actual quantity of the product exchanged, then the:
A. price elasticity of supply is zero.
B. price elasticity of supply is infinite.
C. price elasticity of demand is unitary.
D. price elasticity of demand is zero.
Assume that for Indy, one hour of study time in economics is perfectly substitutable for
an hour of study time in calculus. Indy has exams in both subjects tomorrow and he
determines that if spends all of his time studying economics, he will receive scores of
96 on his economics exam and 45 on his calculus exam. If he studies only calculus, his
econ score will be 81 and his calculus score 90. Based on this information and
assuming that Indy has no better alternative use of his time, what is the opportunity cost
of improving his econ score by one (1) point?
A. 1 point on his calculus exam
B. 1/3 point on his calculus exam
C. 3 points on his calculus exam
D. The opportunity cost cannot be determined with the information given.
The public debt is the sum of all previous:
A. budget surpluses minus the current budget deficit of the federal government.
B. budget deficits minus any budget surpluses of the federal government.
C. expenditures of the federal government.
D. budget deficits of the federal government.
Suppose that people want bike paths through town, but no private individual or business
is willing to build it. This is an example of:
A.negative externalities.
B.government failure.
C.market failure.
D.productive inefficiency.
Consider a barter situation where you have pens and you want pencils. To achieve your
objective there must be a(n):
A. use of capital goods.
B. entry and exit from the market.
C. large number of sellers
D. coincidence of wants.
Price is constant or “given” to the individual firm selling in a purely competitive market
because:
A. the firm’s demand curve is downward sloping.
B. there are no good substitutes for the firm’s product.
C. each seller supplies a negligible fraction of total supply.
D. product differentiation is reinforced by extensive advertising.
The primary aluminum industry in the United States would be described by an
economist as:
A. pure monopoly.
B. pure competition.
C. oligopoly.
D. monopolistic competition.
Which of the following is not one of the causes of the unequal distribution of income in
the United States?
A. Ability differences
B. Job preferences and job risks
C. Education and training
D. The dispersion of market power
Which of the following is correct?
A. Excess reserves may be found by subtracting actual from required reserves.
B. The supply of money declines when the public purchases securities from commercial
banks.
C. Commercial bank reserves are a liability to commercial banks but an asset to Federal
Reserve Banks.
D. Commercial banks reduce the supply of money when they “purchase” personal IOUs
or government bonds from the public.
Refer to the above diagram illustrating a market for pollution rights in which
government has fixed the supply of rights at 1,000 tons. If the demand for pollution
rights were to increase as a result of economic growth, the:
A.volume of pollutants discharged would increase.
B.price of pollution rights would increase.
C.supply curve would shift to the right.
D.demand curve would shift to the left.
Which antipollution policy would be least likely to make use of cost-benefit analysis?
A.Creating a market for pollution rights
B.Charging polluters an emission fee
C.Enacting legislation that bans pollution
D.Using private bargaining when the property rights are clearly defined, the number of
people involved is small, and negotiation costs are small
Which would be one of the factors that shift the aggregate demand curve? A change in:
A. productivity.
B. prices of imported resources.
C. domestic resource availability.
D. profit expectations on investment projects.
The graph depicts a monopolistically competitive firm.
Refer to the above graph representing an individual firm. In the short run, this
monopolistically competitive firm will set price at:
A. $65 and produce 45 units of output.
B. $65 and produce 35 units of output.
C. $50 and produce 35 units of output.
D. $50 and produce 50 units of output.
Refer to the table above. Which product is a normal good but least responsive to a
change in income?
A. Product W
B. Product X
C. Product Y
D. Product Z
Refer to the above diagram. The economy is at equilibrium at point A. What fiscal
policy would be most appropriate to control demand-pull inflation?
A. Decrease aggregate demand by increasing taxes.
B. Increase aggregate demand by decreasing taxes.
C. Decrease aggregate supply by increasing taxes.
D. Increase aggregate demand by increasing government spending.
Nation Statum can produce either 800 units of chemicals or 1600 units of clothing.
Nation Timin can produce either 200 units of chemicals or 800 units of clothing.
A. Nation Statum has a comparative advantage in producing clothing.
B. Nation Timin has a comparative advantage in producing chemicals.
C. Nation Statum has a comparative advantage in producing chemicals.
D. Nation Timin is the high-cost producer of clothing.
Countercyclical discretionary fiscal policy calls for:
A. surpluses during recessions and deficits during periods of demand-pull inflation.
B. deficits during recessions and surpluses during periods of demand-pull inflation.
C. surpluses during both recessions and periods of demand-pull inflation.
D. deficits during both recessions and periods of demand-pull inflation.
Refer to the above graph. Suppose that a competitive firm in long-run equilibrium faces
a market wage W0 as shown. Suddenly, the price of the product it produces decreases. If
other things remain the same, the short-run effect of this change in price would be to:
A. increase the firm’s demand for labor from MRP1 to MRP3.
B. decrease the firm’s demand for labor from MRP1 to MRP2.
C. increase the market wage rate to W1 and decrease the quantity of labor the firm
demands to point A.
D. decrease the market wage rate to W2 and increase the quantity of labor the firm
demands to point B.
A nondiscriminating monopolist will find that marginal revenue:
A. exceeds average revenue or price.
B. is identical to price.
C. is sometimes greater and sometimes less than price.
D. is less than average revenue or price.
If demand for farm crops is inelastic, a good harvest will cause farm revenues to:
A. increase because of the increase in the quantity that farmers can sell.
B. increase because of a downward movement along the supply curve, encouraging an
increase in demand.
C. decrease because of a percentage fall in price greater than the percentage increase in
quantity sold.
D. remain unchanged because the increase in quantity that can be sold will be matched
by an equal decrease in price.
Checkable deposits are:
A. debts of commercial banks and savings institutions.
B. debts of the federal government and government agencies.
C. credits of the federal government and government agencies.
D. credits of commercial banks and savings institutions.
Answer the next question based on the following payoff matrix for a duopoly. The
numbers indicate the profit in thousands of dollars for a high-price or a low-price
strategy
Refer to the above payoff matrix. Assume that firm Y adopts a low-price strategy while
firm X maintains a high-price strategy. Compared to the results from a high-price
strategy for both firms, firm Y will now:
A. gain $100,000 in profit and firm X will lose $150,000 in profit.
B. gain $150,000 in profit and firm X will lose $100,000 in profit.
C. gain $525,000 in profit and firm X will lose $275,000 in profit.
D. lose $150,000 in profit and firm X will gain $150,000 in profit.
One of the basic defenses of economic growth rests on the conclusion that:
A. growth makes workers less obsolete and more secure in employment.
B. growth reduces the cost to society of “common property” resources.
C. growth makes the gap between unlimited wants and scarce resources less acute.
D. a growth-oriented society confers a “work and look to the future” attitude on the
members of society.
Which industry would be considered to be monopolistically competitive?
A. Asphalt paving
B. Breakfast cereals
C. Vacuum cleaners
D. Small-arms ammunition
Pa and Pb represent the prices that citizens (a) and (b), the only two people in this
nation, are willing to pay for additional units of a quantity (Qc) of the public good. Qs
represents the quantity of the public good supplied by government at each of the
collective prices.
Refer to the above information. In equilibrium, the marginal benefit and marginal cost
of the public good will be:
A.$7.
B.$6.
C.$5.
D.$3.
Which is not a commonly heard argument for protectionism?
A. A strong national defense requires that some military products be produced
domestically.
B. Infant industries need short-run, but not long-run, protection from foreign
competition.
C. Specialization along the lines of comparative advantage can lead to greater economic
instability for a nation.
D. When other nations’ economies grow, they typically import fewer goods and
services.
Refer to the graph above. If the price of the product decreases from $6 to $5 because of
a decrease in demand (not shown), total revenue would:
A. increase by $300.
B. increase by $100.
C. decrease.
D. stay the same.
Which of the following allegedly understates the true size of the federal budget deficit?
A. Inclusion of government spending on the savings and loan (S&L) bailout
B. Inclusion of the Social Security surplus
C. Inclusion of federal excise tax receipts
D. Inclusion of current transfer payments
Refer to the above diagram. If aggregate supply shifts from AS1 to AS2, then the price
level will:
A. increase and real domestic output will increase.
B. decrease and real domestic output will increase.
C. increase and real domestic output will decrease.
D. decrease and real domestic output will decrease.
Suppose Tracy obtains 7 units of utility from the last dollar of income she receives and
Brent obtains 7 units of utility from his last dollar of income. Assume both Brent and
Tracy have the same capacity to derive utility from income with identical
marginal-utility-of-income-curves. Those who favor an equal distribution of income
would:
A. advocate redistributing income from Brent to Tracy.
B. advocate redistributing income from Tracy to Brent.
C. be content with this distribution of income between Tracy and Brent.
D. argue that any redistribution of income between them would increase total utility.
A firm’s demand curve for labor:
A. is its marginal product curve.
B. will shift to the left if the price of the output the labor is producing should fall.
C. is perfectly elastic if the firm is selling its product in a purely competitive market.
D. reflects a direct (positive) relationship between the number of workers hired and the
money wage rate.
Which would increase aggregate supply?
A. An increase in business regulation.
B. A decline in productivity.
C. An increase in business subsidies.
D. A decrease in the capital stock.